Halifax CEO: Not aware of physician contract concerns until subpoena

Tuesday

Aug 19, 2014 at 8:16 PMAug 19, 2014 at 11:12 PM

Halifax Health CEO Jeff Feasel says he didn’t know until a subpoena was served that a compliance officer had concerns about the integrity of physician contracts and other potential legal issues at the hospital.

By skyler swisherskyler.swisher@news-jrnl.com

DAYTONA BEACH — Halifax Health CEO Jeff Feasel says he didn’t know until a subpoena was served that a compliance officer had concerns about the integrity of physician contracts and other potential legal issues at the hospital. Ultimately, Elin Baklid-Kunz would file suit in federal court as a whistleblower costing the 678-bed public hospital system about $120 million in settlement and legal expenses in the five-year litigation battle.Feasel said the whistleblower never directly brought her concerns to his attention before filing suit.“I really didn’t know of the nature of what was being done and what was being alleged until we received the subpoena,” said Feasel, who was named CEO in January 2005. Hospital officials conducted their second of three town hall meetings Tuesday, this one at Halifax Health’s France Tower conference room, to tell their side of the story behind the settlement. They deny wrongdoing and have taken aim at the federal government’s enforcement approach, calling some of its health care regulations arcane, unclear and draconian. Marlan Wilbanks, an attorney who represented Baklid-Kunz, said if the system had been working properly senior leaders at Halifax Health should have been aware of his client’s concerns. “There were major problems that anyone who is actively involved in managing a hospital should have certainly been informed about,” Wilbanks said. Hospital officials say they did nothing wrong and were only trying to structure agreements in a way to keep qualified doctors treating indigent patients. The whistleblower and her attorneys argue the hospital didn’t do enough to stop billing practices and employment procedures that drive up the nation’s health care bill. Baklid-Kunz and her attorneys received $20.8 million of the settlement money for reporting the matter to the federal government, a larger purchaser of health care through Medicare and other programs. The hospital has released a timeline of how negotiations and the case unfolded. Baklid-Kunz filed her lawsuit in June 2009 after first raising concerns with in-house legal counsel and her supervisor. The first subpoenas were served in December 2009, which is when Feasel said he became aware, and the hospital’s seven-member board was then notified a month later in a closed litigation session. The suit was unsealed in September 2010, and the hospital was made aware of the full scope of the allegations. From then on, hospital officials relied on advice from their attorneys, which included one of the nation’s leading health care law firms: McDermott, Will & Emery, Feasel said.“When I start playing lawyer, we are all in trouble,” he said. “I say that somewhat tongue-in-cheek. That’s not my job. My job is not to provide legal advice to our organization.” Dave Davidson, the hospital’s chief general counsel, resigned effective Oct. 1, although he didn’t give a specific reason why. Davidson told hospital commissioners in a meeting he took “full ownership” of the contracts at the center of the suit. The suit was broken into two cases.The first, which was settled for $85 million in March of this year, accused the hospital of violating the Stark Law when crafting agreements with six cancer doctors and three neurosurgeons. That statute prohibits paying doctors based on referrals and volume. The U.S. Department of Justice joined the suit in September 2011, arguing such contracts can induce doctors to perform unnecessary tests and procedures. The second case, which the Justice Department did not join, focused on allegations that the hospital overcharged Medicare by unnecessarily admitting patients for short-stays, instead of billing at a lower observation rate.That part of the case was settled last month for $1 million, and hospital officials say they “basically won” that part of the suit and settled to avoid legal expenses. Over the five-year case, the hospital spent about $24 million on its own legal fees and paid about $10 million in the whistleblower’s attorney fees. The financial damages could have been much worse, hospital officials said during a presentation and question-and-answer session at the hospital’s France Tower.A Justice Department spokeswoman could not be reached for comment Tuesday to give its perspective on negotiations. On July 11, 2011, the Justice Department wanted $185 million to settle the matter, said Ann Martorano, Halifax Health’s chief operating officer — much higher than the $86 million the hospital would eventually settle for.With the belief they did nothing wrong based on outside legal advice, hospital officials declined the initial offer. “It was absolutely ludicrous to us at the time,” Martorano said. “We said, ‘We’ll fight this.’ ”A milestone, though, happened in October 2013 when a court ordered South Carolina’s Tuomey Regional Medical Center to pay $237 million in a case involving Stark Law allegations that sent shock waves through the hospital industry At that point, hospital officials and their lawyers started considering a settlement.The hospital faced a potential judgment of $1.14 billion. The Justice Department’s seemingly unlimited resources and ability to impose massive penalties played a role in the hospital’s decision to settle even though it didn’t think it did anything wrong, Feasel said. “I’ve learned when you are dealing with the government, and they tell you you are wrong, you are wrong,” he said.About 70 people attended Tuesday’s meeting at Halifax and were largely supportive of the administration.The final town hall meeting will be at 4 p.m. today at the Mary McLeod Bethune Performing Arts Center, 698 W. International Speedway Blvd.